The European Central Bank (ECB) has initiated the “preparation phase” for the digital euro project. Notably, the issuance of a digital euro is not confirmed. However, the ECB’s governing council is progressing to the next stage after a comprehensive two-year investigation.
Foundation Laid: Nov. 1 Marks the Beginning
As of November 1, the ECB is set to commence the groundwork for a potential digital euro issuance. It is also crucial to note that the creation of a central bank digital currency (CBDC) is not assured. This was further emphasized by the ECB. The decision follows the publication of a detailed 44-page report outlining the design and distribution possibilities for a digital euro.
The designated “preparation phase” is scheduled for two years. During this time, the ECB will concentrate on finalizing regulations for the digital currency and identifying potential issuers. This phase will also involve extensive “testing and experimentation” aligned with user feedback and compliance with central bank requirements.
Decision Ahead and Legislative Landscape
Furthermore, the ECB clarified that, after the two-year period, the Governing Council would assess whether to progress to the next stage of preparations. This decision hinges on completing the European Union’s legislative process. It’s important to underscore that the launch of the preparation phase does not equate to a definitive decision on issuing a digital euro.
However, in June, the European Commission proposed a legislative plan outlining the framework for a digital euro. The intention is for users to access the CBDC through their banks. Fabio Panetta, an executive board member at the ECB, reiterated the goal of having a digital euro coexisting with cash, featuring robust privacy measures.
Controversy, Criticism and Regulatory Spotlight
Moreover, the ECB faced criticism, particularly ECB President Christine Lagarde. This was for suggesting in a prank video that a digital euro could be wielded to control user payments. This incident drew attention in the crypto space, raising questions about the potential implications of a digital euro.
The rollout of any digital euro is likely to draw scrutiny from regulators and policymakers, especially with the European Parliament election scheduled for June 2024. Importantly, the outcome of this development could play a significant role in shaping the digital currency landscape in the region.